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DABC Director Pummeled in Legislative Committee

by Eric S. Peterson
- Posted // 2011-07-20 -

It was a bruising committee hearing today for DABC Director Dennis Kellen, who responded for the first time personally to legislators about his agencies loss of $300,000 from a liquor packaging agency in Eden, Utah.

The subject of the woefully insolvent Eden Packaging Agency was wielded against Department of Alcoholic Beverage Control Director Dennis Kellen today during a meeting of the Legislature’s Business and Labor Interim Committee.

The packaging agency, a privately contracted liquor outlet servicing a community too small for a full liquor store, was blasted in a recent legislative audit for costing the state $300,000. Legislators today held Kellen to task for oversight of the agency which had been misclassified, the owners had not been subject to a background check and who had received monthly state compensation despite accounts being in the red from the very beginning of the Ogden-area store’s one year in operation. “What we have done to correct the problem is actually establish an audit manager that is responsible for all package agencies,” Kellen said noting that previously those duties were left to one of three regional managers who also looked after the state’s 114 to 118 other liquor outlets.

“We learned from the Eden experience that we need to take better care of our agencies,” Kellen said. “So we have split off the packaging agencies.” Members of the committee, however, suggested more remedies to the problem that ranged from forcing the agencies to make more frequent deposits of state funds, to privatizing the agencies to even seeing that better management oversaw them. It was a question of leadership that Sen. John Valentine, R-Orem stuck to Kellen during the hearing.

“Did [DABC] staff mislead the commission?” Valentine asked Kellen.

“The staff has never, ever misled the commission in the last 37 years,” Kellen said defensively. An answer that did not console Valentine who pointed out that the liquor commission said they were not aware of Eden’s problems until April 2011 when the legislative audit came out, even though DABC staff was aware of an $187,000 shortfall from the agency in 2010.

“That is changed,” Kellen said. “Package Agencies and their statuses will [now] be talked about at every commission meeting.”

Rep. Don Ipson, R-St. George said he had opened a bill file for the next legislative session about the agencies' accounting behavior, which he called a “time bomb waiting to blow up in people’s faces.” He hopes agencies could remit funds daily back to the state so as to reduce the possibility that the money is used to bolster other aspects of a packaging agencies business.

Rep. Gage Froerer, R-Huntsville asked if there might be more accountability in the process if packaging agencies could be privatized to bring a market discipline to the system. “I think now is the time to look at some kind of privatization, and take this out of the hands of government,” Froerer said.

While a combination of these reforms will likely emerge in the next session it also seems just as likely that Kellen will not long sit in the director’s seat at the DABC to oversee them, according to The Salt Lake Tribune which reported Kellen as being likely to retire in the next few months.

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